Strategic Management of Information Systems and Cost Allocation

This assignment covers various topics related to the strategic management of information systems and cost allocation. It starts with a discussion on the importance of digital strategy in organizations, as seen in 'The Strategic Management of Information Systems: Building a Digital Strategy' by Peppard and Ward (2016). The concept of reorder level or ordering point is also explained, along with its graphical representation. Additionally, the assignment delves into cost allocation techniques, including overhead analysis, and provides an example sheet for reallocation of resources. It highlights the significance of resource optimization strategies in organizations, as demonstrated by 'Research Costs Investigated: A Study Into the Budgets of Dutch Publicly Funded Drug-Related Research' by van Asselt (2017). Overall, this assignment offers a comprehensive understanding of strategic management and cost allocation principles.

IT Applications for
Management Accounting

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
QUESTION 1...................................................................................................................................1
1 Determination of reorder level............................................................................................1
2. Analysing the importance of Re-order level......................................................................3
3 Measuring the EOQ.............................................................................................................3
4 Importance of total cost of ordering and Management accounting in decision making.....4
QUESTION 2...................................................................................................................................4
1 Presenting the Overhead analysis sheet with the help of various costing methods.............4
2 Determining the requirements of re- allocation in the organisation....................................5
QUESTION 3...................................................................................................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8
APPENDIX......................................................................................................................................9

INTRODUCTION
To modernised the use of various accounting techniques there is need to install or
implement the digital techniques in terms with recording, measuring and analysing the business
transactions. Thus, in term with the management accounting the method is applied over the
internal ability of the firm such as production, selling and distribution as well as cost analysing.
Therefore, record of such transactions will help the organisation in analysing the adequate
decision making as well as present the fruitful results. In the present report there will be various
measurement based on the production, order, selling and distribution of the Summer Fruit Plc
whereas, overhead analysis of Browning Steel Ltd will be measured. Thus, such measurement
will help this organisation to get the informations which are relevant with Re-order level, EOQ
and overhead analysis measurement with the help of excel sheets.
QUESTION 1
1 Determination of reorder level
The reorder level can be denoted as the level of production and the outputs which were
being received by such business operations over which the managers will determine the reorder
order level. Thus, this will reflect the ability of the company in making the adequate production
and able to meet such demands which were risen in the market.
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Illustration 1: Graphical presentation of reorder level
Source :(Gebreiter, 2016)
In terms with analysing the Re-order level there will be various steps such as
Identification, Input and output. Thus, such measurements are listed in the appendix
However, in terms with the various steps of the re- order level there has been calculations
which are based on several methods such as:
 Recording of all the transactions in the “particulars” cell than write amount or figures
among such cells.
 Then the formula will be used such as writing “=” then selecting the usage cell and after
this writing “*” multiplication symbol and selecting the maximum lead time of cell than
press enter which will brings the Outcome.
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2. Analysing the importance of Re-order level
By considering the importance of such reorder level which in turn helps in analysing the
maximum and minimum order level on which the organisation could become able to have a new
order. Thus, the requisition of order and received material are helpful for the business to use the
point over such order points over specific time duration. Hence, it will reach when inventory on
hand and quantities leads to the usage quantity for quantity of inventory safety (Re-order Level
or Ordering Point or Ordering Level:, 2011). Hence, it is fruitful for business in analysing the
use of such technique which in turn reflects the ability of company in meeting the re-order level.
Moreover, it can be said that there will be fruitfulness of such reorder level in terms of
meeting the level where they could again get an order.
3 Measuring the EOQ
This is the optimum quantity of goods which are being purchased for the initial
requirements and then for the rest of the period the reduction in the costs of ordering were made.
Therefore, it consists of carrying and holding charges of the items in inventories.
In terms with measuring the EOQ there is need to follow such steps as:
 In the OUTPUT AREA there is need to write “Reorder Quantity” and then the two cells
beneath it Write “Reorder level” and among them writ the figures of such elements and
then beneath such figures write “EOQ”. (Appendix 2)
 To calculate the EOQ there is need to use such formula as order placing cost and the
holding cost per apple were need to be calculated as well as the annual demand.
 In terms with calculating the Purchase cots of the order is selecting the cell and then type
“=” then select the Usage value and then write “*” multiplication symbol and then
selecting the “period value” cell and press Enter such as:
 Hence, After having such calculation than as to find the total of such calculations. Thus,
there is need to select the total cell and type the formula such as “=SUM()” than select all
the cells and then press ENTER.
Importance of EOQ:
 EOQ will be beneficial in reducing the holding and storage costs of inventories of the
organisation.
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 Reduction in the costs of manufacturing the or production process which in turn helps the
business in making the adequate utilisation of all the relevant resources.
 This concept is very specific to the entity as it bring the appropriate results relevant to the
re-order level and the holding period.
4 Importance of total cost of ordering and Management accounting in decision making
Management accounting is based on various tools and techniques which in turn facilitate
the organisation or manager with the adequate outcomes. therefore, they become able to plan the
improvements in the operational activities, controlling the costs as well as they could plan
expansion. Hence, the use of economic order quantity which in turn reduces the cost of
managing the inventory in the organisation (Goddard and Simm, 2017).
Importance of total cost of ordering:
 The business will manufacture the goods in accordance with the order it has acquired by
consumers.
 Such technique will help in reducing the wastage as well as brings increment in
production
 The quantity will be produces in accordance with the order gathered by firm.
QUESTION 2
1 Presenting the Overhead analysis sheet with the help of various costing methods
Listed in appendix 3
To : Manager,
(Browning Steel Ltd)
Subject: Process of cost allocation and overhead absorption rates
Sir,
In terms with using the various costing techniques such as cost allocation and overhead
absorption rate which in turn beneficial for the managers in making the adequate decisions as
well as presenting the adequate answers which in turn helps in analysing the actual
requirements of inventory, cost as well as efficiency of organisation to meet such needs. Hence,
there will be use of other methods of costs such as Reciprocal and direct method. Thus,
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Reciprocal cost techniques deals in allocating the costs of support department to the cost of
operating departments which in turn helps in mutually distribution of all the costs among all
supported units of the firm (Gebreiter, 2016). However, the direct method will be beneficial
such as it allocates the support costs only to the operating departments as there will be no
interaction in between support units prior to allocations (Clinton and England, 2016). Hence, it
can be said that the use of such techniques will help entity in allotting the adequate costs to all
the departments as well as all the supporting units will have ten sufficient amounts to perform
the operating tasks.
Thanks and Regards,
Operating Manager,
(Browning Steel Ltd)
2 Determining the requirements of re- allocation in the organisation
In order to allot the costs over various departments which in turn helpful for the business
in making the adequate changes in their efficiency as well as increment in the productivity.
Therefore, it can be said that the costs of budgets assign to various departments which in turn
leads such units in making the adequate costs over them as well as helps to make the perfect
utilisation of all the resources (Concepts In Allocation Of Service Department Costs, 2017).
Thus, it brings the ability to make the estimation over future needs and demand as well as ability
of corporation to meet such requirements in such limited period.
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Illustration 2: Example of reallocation of resources
Source: (Goddard and Simm, 2017)
QUESTION 3
In terms with my personal skills and talent to implicate the use of excel at workplace I
feel that it is the easiest and soothing way to analyse any big calculation as well as with the
prompt way to have the outcomes. Therefore, the use of such techniques are need to be
implicated or adopted by business or every individual. There will be use of various formulas and
techniques to analyse the outcomes of such results (5 Key Uses of Excel in the Work Place,
2014). Hence, it can be said that, it brings the adequate answers in terms with preparing the
memos, tracking the sales trends and evaluating the other organisational data. However, it feels
that the use of such digital techniques is very helpful in measuring the big transactions as well as
analysing the gains and losses from various business operations. Thus, increment in the use of
such techniques will effectively decrease influences of various accounting and auditing
professional.
In accordance with the use of such methods in analysing the cost as well as performing
the daily tasks of the organisation I can use it various segmentation or in different organisations
by building the charts, diagrams, conditional formatting, determine trends, brining the data,
online access, present various tables, sorting and filtering the data, basic mathematics as well as
producing graphs (Peppard and Ward, 2016). Therefore, with the implication of such techniques
the business will be beneficial in analysing the use of such techniques as well as presenting the
authenticated informations to others. I think the use of such techniques will definitely help
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various organisation in presenting the fruitful disclosure of financial statements, financial
position of the business as well as helps stakeholder or analyse the profitability or entity. Thus,
such applications will help the organisation in gaining the adequate amount of investments as
well as improves the capital gathering of the firm. I believe that, if a person acquire the ability to
make the adequate analysis of accounts of the business by using excel sheet that it can be said
that there is no need of any paper work as to keep the data or calculate the transactions.
I think the use of spreadsheet helps the firm in analysing the adequate return over
investment as well as record transactions in authenticated manner. Therefore, the managers will
have record of all the consumers of country as well as make planning to retain them. Thus, with
the help of such software there will be reduction in the calculation mistakes as it facilitates
various formula or solver to solve big mathematical problems such as linear programming,
arithmetic and geometric progressions etc. (van Asselt and et.al., 2017). Hence, it helps in
reducing the time utilisation over analysing the end results as well as helps in presenting quick
measurement. However, with the help of such transactional activities the managerial
professionals in organisation will become able to generate the adequate decisions relevant with
budgeting, costing as well as preparation of various financial statements.
Therefore, with the use of such software managers in the organisation will generate
innovative ideas to improve the efficiency of the firm as well a make new policies which are
relevant with the productivity as well as prices of the products must be levied. Thus, it will also
fruitful in measuring the cash inflows and outflows over the period as well as it keeps record of
all the previous period transaction (Renz, 2016). Thus, such data will be used in measuring the
adequate profitability, growth of the business. I think that, Excel is the essential tool for
computing all transactions held in period as well as it is required to be operated by all the
employees in the organisation which in turn makes it easier to fetch information from all the
departments in the organisation (Madhuka and Bandara, 2016).
CONCLUSION
By considering the above report it can be said that the managers at various organisation
such as Summer fruits and Browning Steel Ltd has used various methods to analyse the costs and
the inventory management techniques which in turn help them in making the adequate estimation
of the expenses required. Further, there has been adequate use of Excel sheet and its advantages
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were explained which in turn helps in attaining the authenticated data as well as the reliable
results which in turn helps in enhancing the organisational efficiency as well as increment in the
production.
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REFERENCES
Books and Journals
Clinton, B. D. and England, B., 2016. Principles of healthy managerial costing: a principles-
based approach to cost modeling would enhance the state of management accounting and
elevate its role in providing decision-support information. Strategic Finance. 98(3). pp.40-
46.
Gebreiter, F., 2016. “Comparing the incomparable”: Hospital costing and the art of medicine in
post-war Britain. The British Accounting Review. 48(2). pp.257-268.
Goddard, A. and Simm, A., 2017. Management accounting, performance measurement and
strategy in English local authorities. Public Money & Management. 37(4). pp.261-268.
Madhuka, H. B. N. and Bandara, R. M. S., 2016. Impact of Management Accounting Practices
on Financial Performance of Listed Manufacturing Companies in Sri Lanka.
Peppard, J. and Ward, J., 2016. The strategic management of information systems: Building a
digital strategy. John Wiley & Sons.
Renz, D. O., 2016. The Jossey-Bass handbook of nonprofit leadership and management. John
Wiley & Sons.
van Asselt, T. and et.al., 2017. Research Costs Investigated: A Study Into the Budgets of Dutch
Publicly Funded Drug-Related Research. PharmacoEconomics, pp.1-9.
Online
5 Key Uses of Excel in the Work Place. 2014. [Online]. Available through
:<http://learn.filtered.com/blog/5-key-uses-of-excel-in-the-work-place>.
Concepts In Allocation Of Service Department Costs. 2017. [Online]. Available
through :<http://www.principlesofaccounting.com/chapter-23/service-costs/>.
Re-order Level or Ordering Point or Ordering Level:. 2011. [Online]. Available
through :<http://www.accountingexplanation.com/reorder_level.htm>.
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APPENDIX
1 reorder level
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2 EOQ
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3 Overhead Analysis Sheet:
Overhead Analysis
Sheet
Overheads Basis
Machin
ing
Assemb
ly
Finishi
ng
Mainten
ance
Cantee
n Total
Supervisors Salaries Allocation 316500 189900 263750 158250 126600
105500
0
Specific overheads Allocation 1266 1583 2638 1161 1583 8229
Rent and Rates Floor Area 8512 9119 10944 4864 2432 35870
Machine insurance
Machine
Value 6492 5410 3246 1082 649 16880
Machine depreciation
Machine
Value 17042 14202 8521 2840 1704 44310
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